Investors May Still Find Value in High-Quality, Dividend ETFs


Looking at dividend valuations relative to historical data, dividend stocks may be slightly expensive, but dividend-paying stocks are not at the point of being excessively overvalued, Mazza added.

“The data above indicates that while dividend stocks may no longer be inexpensive, the broader market may not look too cheap either,” Mazaa said. “In an environment with depressed yields and slowing corporate profits, the income generated from dividend paying stocks may be worth paying for.”

Investors should also consider focusing on high-quality dividend growth stocks as a way to generate returns in a slow growth environment. Dividend growth helps investors gain exposure to areas with sustainable income, whereas high-dividend yielders focus on current income, which may be subject to greater uncertainty.

Investors also have a number of other high-quality dividend-paying stock ETFs to choose from. Among the most popular dividend ETF plays available, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years and has a 2.16% 12-month yield. The Schwab US Dividend Equity ETF (NYSEArca: SCHD) includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years, and it has a 2.79% 12-month yield. The ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) only includes companies that have increased their dividends for at least 25 consecutive years and offers a 1.79% 12-month yield.